Exhibit
10.1


 


Texas
Independent


Exploration Limited


 


1600 Smith, Suite 3800


Houston, Texas 77002


Phone: (713) 751-0419
ext. 232


Fax: (713) 759-0234


 


June 15, 2004


 


Whittier
Energy Company


333 Clay Street


Suite 1100


Houston, TX  77002


 


	
  RE:

  	
   

  	
  Offer to Sell

  
	
   

  	
   

  	
  Tom Lyne Field, Live
  Oak County, TX

  
	
   

  	
   

  	
  Cameron Field, Starr
  County, TX

  
	
   

  	
   

  	
  Scott & Hopper
  Field, Brooks County, TX

  



 


Gentlemen:


 


TEXAS INDEPENDENT
EXPLORATION LIMITED, a Texas limited partnership and successor by conversion of
Texas Independent Exploration, Inc., GULFCOAST ACQUISITIONS LIMITED, a Texas
limited partnership and successor by conversion of Gulfcoast Acquisition
Corporation, FREDERICK W. ZIMMERMAN, individually, and FREDERICK W. ZIMMERMAN
d/b/a ISLAND RESOURCES (hereinafter collectively referred to as “Seller”
or “Sellers”) hereby offer to sell, subject to the terms and conditions of this
letter agreement (the “Agreement”), to WHITTIER ENERGY COMPANY, a Nevada
corporation (hereinafter referred to as “Buyer”), Seller’s right, title
and interest, as described below, in and to the following assets, SAVE AND
EXCEPT the Excluded Assets (as hereinafter defined) (collectively, the “Properties”):


 


(a)                                  The specific
interests set forth on Exhibit “A” attached hereto and made a part
hereof in and to all of the oil and gas wells (the “Wells”) set forth on
Exhibit “A”, together with like interests in all well bores of the Wells
(the “Well Bores”), together with like interests in the rights to
operate, maintain, and produce, receive, sell, dispose and/or market production
from the Wells, together with like interests in the oil, gas and mineral leases
described on Exhibit “A” and any extensions, ratifications, and
amendments thereof (collectively the “Leases”), but only insofar as such
interests are required to operate, maintain, and produce, receive, sell,
dispose and/or market oil, gas and other hydrocarbons produced or capable of
being produced from each of the Wells; and, as to that portion of the Leases
covering lands and subsurface depths other than the lands and subsurface depths
covered or occupied by the Wells and Well Bores, the specific interests set
forth on Exhibit “A” in and to the Leases, insofar as the Leases cover
and relate to the lands and subsurface depths described on Exhibit “A”
(the “Lands”);


 


(b)                                 To the extent same
are used in connection with, attributable to or allocable to the Leases, Lands,
Wells or Well Bores, like interests in (i) all machinery,


 


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improvements, personal property, fixtures,
equipment, pipelines and other facilities (except as excluded below)
including without limitation wellhead equipment, pumping units, saltwater
disposal facilities, injection facilities, compression facilities, down hole
equipment, casing, pump jacks, storage tanks, meters, gathering lines,
separators, and other equipment, and (ii) all oil, gas and related hydrocarbons
(together with minerals produced in conjunction therewith) produced on or after
the Effective Date (collectively “Personal Property”);


 


(c)                                  To the extent same
relate to or are attributable or allocable to the Leases, Lands, Wells or Well
Bores, like interests in and to,
or otherwise derived from, all presently existing and valid oil, gas and/or
mineral unitization, pooling, and/or communitization agreements, declarations,
designations and/or orders (including, without limitation, those described on
Exhibit A hereto) and in and to the properties covered and the units created
thereby (including, without limitation, all units formed under orders, rules,
regulations, or other official acts of any federal, state, or other authority
having jurisdiction, and voluntary unitization agreements, designations and/or
declarations) (the “Units”); and


 


(d)                                 To the extent same
relate to or are attributable or allocable to the Leases, Lands, Wells, Well
Bores, Personal Property or Units or are used in connection with the
exploration, development, operation or maintenance of the Leases, Lands, Wells,
Well Bores, Personal Property or Units, and to the extent same are assignable
or transferable by Seller without restriction under applicable law or third
party agreements (without the payment of any funds or other consideration),
like interests in (i) all contracts, agreements and other instruments (except
as excluded below), (ii) all rights of way, easements, other rights of surface
use, authorizations, permits, licenses, authorizations, and similar rights and
interests, and (iii) all other rights, privileges, benefits, powers and
obligations conferred or imposed upon the owner and holder of the Leases,
Lands, Wells, or Personal Property.


 


As used herein, the term “Wells” also includes any
new well drilled and completed as a replacement for any well set forth on
Exhibit “A” which, although producing oil or gas in commercially paying
quantities or capable of producing oil or gas in commercial paying quantities,
nevertheless encounters downhole mechanical difficulties or downhole conditions
that require such well to be plugged and abandoned.  In such event, such “replacement well” shall be considered for
all purposes hereunder as one of the Wells.  The surface location of any “replacement well” shall be
within 100’ of the well being replaced, and Assignee shall use its best efforts
as are reasonable under the circumstances to position the producing bottomhole
location of such “replacement well” within 100’ of the previously producing
bottomhole location of the well being replaced.


 


The Properties do not and will not include any
interest in the following assets and properties (“Excluded Assets”):


 


(a)                                  all (i) trade
credits, accounts receivable, notes receivable and other receivables
attributable to each Seller’s interest in the Properties with respect to any
period of time prior to the Effective Date, and (ii) deposits, cash, checks in
process of collection, cash equivalents and funds attributable to each Seller’s
interest in the Properties with respect to any period of time prior to the
Effective Date;


 


(b)                                 all corporate,
financial, and tax records of Sellers (provided, however, Seller shall provide
Buyer and Buyer’s independent accountants with reasonable access to records
(including Seller’s supporting revenue and expense records relating to the


 


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Properties) necessary to satisfy disclosure
requirements of federal and state securities laws;


 


(c)                                  all claims and
causes of action of Sellers (i) arising from acts, omissions or events, or
damage to or destruction of property occurring prior to the Effective Date, or
(ii) affecting any of the Excluded Assets set forth in this definition;


 


(d)                                 all rights, titles,
claims and interests of Sellers accruing prior to the Effective Date (i) under
any policy or agreement of insurance or indemnity, (ii) under any bond, or
(iii) to any insurance or condemnation proceeds or awards;


 


(e)                                  claims of Sellers
for refund of, or loss carry forwards with respect to, income, severance or
franchise taxes or any other taxes attributable to: (i) any period prior to the
Effective Date, or (ii) any of the Excluded Assets set forth in this
definition;


 


(f)                                    all amounts due or
payable to Sellers as adjustments or refunds under any contracts or agreements
affecting the Properties, with respect to periods prior to the Effective Date,
specifically including, without limitation, amounts recoverable from audits
under operating agreements;


 


(g)                                 all amounts due or
payable to Sellers as adjustments to insurance premiums related to the
Properties with respect to any period prior to the Effective Date;


 


(h)                                 all proceeds, benefits,
income or revenues accruing (and any security or other deposits made) with
respect to (i) the Properties prior to the Effective Date; and (ii) any of the
Excluded Assets set forth in this definition;


 


(i)                                     all attorney-client
communications or attorney work product, records and documents subject to
unaffiliated, third party confidentiality provisions, or claims of privilege;


 


(j)                                     (i) seismic data
and any other data of a similar nature, (ii) reserve information and reports,
(iii) seismic or any seismic interpretive or forecast data, development and
exploration geological records, geochemical, and geophysical information and
data, or other proprietary information relating thereto, whether owned or
licensed by Sellers, and (iv) any interpretive data;


 


(k)                                  all of Sellers’
intellectual property, including but not limited to proprietary computer
software, patents, trade secrets, copyrights, names, marks, and logos;


 


(l)                                     all vehicles,
furniture, office supplies, office equipment, telecommunications equipment,
telecommunication facilities, telephones, telephone systems and related
equipment, microwave systems, radios, radio systems and related equipment and
licenses, computers, tools and other similar personal property;


 


(m)                               any pipelines,
easements, fixtures, tanks, LACT units or equipment located on the Properties
which belong to third persons, including lessors, provided, however, that any
rights in such items held by Seller are included in the definition of
Properties to the extent such rights apply to the specific interest set forth
on Exhibit “A” and are used in connection with the Lands, Leases, Wells or Well
Bores;


 


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(n)                                 all of Sellers’ interests in the Wells, Well
Bores, Leases, Lands, Personal Property and Units not included within the
specific interests set forth on Exhibit “A” in such Wells, Well Bores, Leases,
Lands, Personal Property and Units; and


 


(o)                                 As to the Swierc Gas Unit facility, the
currently inactive and bypassed Dehi tower and Dehi reboiler located on the
lands covered by the Swierc Gas Unit being identified as follow:


 


 


	
  Item Description

  	
   

  	
  Manufacturer

  	
   

  	
  Manu/Date

  	
   

  	
  Serial #

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dehi
  Tower

  	
   

  	
  Smith Industries

  	
   

  	
  1979

  	
   

  	
  25919

  	
   

  
	
  Dehi
  reboiler

  	
   

  	
  Smith Industries

  	
   

  	
  1979

  	
   

  	
  21763

  	
   

  



 


(p)                                 the
non-exclusive right to use facilities that are used in common with the
Properties and the Excluded Assets for purposes of the production, treatment
and marketing of hydrocarbons, including such things as meter runs, gathering
systems and pipelines.


 


TERMS AND
CONDITIONS


 


1.                                       As
used herein the term “Purchase Price” shall mean collectively all consideration
given by Buyer to Seller to purchase the Properties.  Subject to Sections 3 and 33 below, the amount of the cash
purchase price for the Properties to be paid by Buyer to Seller at Closing (as
hereinafter defined) shall be Five Million Two Hundred Seventy Thousand and
No/100 Dollars ($5,270,000.00) (the “Cash Purchase Price”).  Such amount shall be paid by wire transfer
in immediately available funds to Seller’s account as designated by Seller,
which designation shall be made not later than two (2) Business Days prior to
the date such payment is due.  “Business
Day” as used in this Agreement shall mean any day, except a Saturday,
Sunday or other day on which commercial banks in New York, New York or Houston,
Texas are required or authorized by law to be closed.


 


2.                                       In
addition to the Cash Purchase Price, and subject to Section 3 below, as
additional consideration to Seller for the transactions contemplated herein,
Buyer shall execute in favor of and deliver to Seller at Closing, a  subordinated
promissory note in the principal amount of Two Million One Hundred Eighty Seven
Thousand Three Hundred Thirty and No/100 Dollars ($2,187,330.00) with a coupon
rate of 7% simple interest payable quarterly and convertible immediately after
issuance at Seller’s option into common stock of Whittier Energy Corporation
(the “Convertible Note”).  The
Convertible Note conversion price shall be $2.00 per common share.  The Convertible Note shall be
substantially in the form attached hereto as Exhibit F, and shall also be
executed by Whittier Energy Corporation as indicated therein.


 


3.                                       As additional consideration to Seller for the transactions
contemplated herein, Buyer shall deliver to Seller at Closing, a  warrant,
or warrants, substantially in the form attached hereto as Exhibit I,
representing the right to purchase, in the aggregate, 300,000 shares of common
stock of Whittier Energy Corporation at an exercise price of $2.50 per share
and having a term of three years from the date of issuance.


 


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4.                                       In
addition to the above, as additional consideration for the transactions
contemplated herein Seller and Buyer shall execute at Closing the Upside
Sharing Payment Agreement attached hereto as Exhibit “B” (the “Upside
Sharing Payment Agreement”).


 


5.                                       Also
in addition to the forgoing consideration, as additional consideration for the
transactions contemplated herein, Buyer shall carry the “Retained Interest of
Seller” (as defined in the Exhibit “C” attached hereto and made a part hereof,
in the drilling of the first two (2) wells drilled on the Cameron 137 lease
(see Exhibit “A” for description of said lease) after Closing and in the
drilling of the first two (2) wells drilled on the Scott & Hopper leases
(see Exhibit “A” for descriptions of said leases) after Closing.  The terms and conditions more particularly
describing the Retained Interest of Seller and governing these carried
interests, including the reassignment of certain portions of the Properties
from Buyer to Seller upon the happening of certain events, are set forth on
Exhibit “C”.


 


6.                                       Also
in addition to the forgoing consideration, as additional consideration for the
transactions contemplated herein, Seller shall be entitled to the “Scott
& Hopper #3 Well Excess Production Volumes” being 50% of the “Buyer’s
Net Revenues” (as hereinafter defined) attributable to the production produced,
saved and sold from the Scott & Hopper #3 well that is in excess of the
production amounts set forth on the schedule attached hereto as Exhibit
“D” and made a part hereof.  Payment(s)
of such Scott & Hopper #3 Well Excess Production Volumes, if any, shall be
made on an annual basis from Buyer to Seller no later than 120 days after
Buyer’s fiscal year-end.  As used in
this Section 6, (1) “Buyer’s Net Revenues” shall mean the proceeds
received by Buyer attributable to Buyer’s Net Revenue Interest in production less
(i) any expenses incurred or paid by Buyer, or assessed to or against Buyer,
for actual processing or transportation costs that occur downstream of the
sales meter located on the leased premises on which the producing well is
located, and (ii) severance and ad valorem taxes attributable to such production,
and (2) “Buyer’s Net Revenue Interest” shall mean Buyer’s share of production
in the Properties acquired from Seller pursuant to this Agreement.


 


7.                                       The
Purchase Price and additional consideration provided for hereunder excludes any
sales taxes or other taxes required to be paid in connection with the sale of
the Properties pursuant to this Agreement. 
Buyer, however, shall be liable for any sales and use taxes, conveyance,
transfer and recording fees and real estate transfer stamps or taxes that may
be imposed on any transfer of the Properties pursuant to this Agreement.  Seller shall, in accordance with applicable
law, collect and remit any sales or similar taxes that are required to be paid
as a result of the transfer of the Properties by Seller to Buyer.


 


8.                                       The
effective date of the transaction shall be 7:00 a.m. local time on
March 1, 2004 (“Effective Date”), and, subject to the conditions stated in
this Agreement, the consummation of the transactions contemplated hereby (the “Closing”)
shall occur at Seller’s office on or before June 10, 2004; provided,
however, by mutual agreement Seller and Buyer may extend the date of Closing to
occur on or before five (5) Business Days after June 10, 2004.  Notwithstanding
anything to the contrary contained herein, either Seller or Buyer, acting
independently of one another and in the exercise of its sole and absolute
discretion, has the right to terminate this Agreement at any time prior to
Closing for any reason whatsoever.  In
the event of such termination, (i) this Agreement shall no longer be of any
force and effect,  and the transactions contemplated by this Agreement shall be
abandoned and (ii) all rights and obligations of the parties under or pursuant
to this Agreement shall terminate without further liability or obligation from
one party to the other except for the hereinafter identified Prior
Confidentiality Agreement


 


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and Due Diligence
Letter.  Such termination shall be made
by the delivery of written notice from the terminating party to the other party
before Closing.


 


9.                                       Seller
shall be liable for all costs (including but not limited to ad valorem,
production, severance or excised taxes and royalties) and entitled to all
revenues attributable to the Properties prior to the Effective Date.  Buyer shall be responsible for and entitled
to same after the Effective Date.  Any
adjustments pursuant to this section will be made at Closing if
possible.  If adjustment amounts are
indeterminable as of Closing, adjustment will be made within ninety (90) days
of Closing.  Each of the parties hereto,
on behalf of itself and its parent, subsidiary and affiliated entities, agrees
to indemnify and hold harmless the other from the costs, liabilities and
obligations assumed or retained herein. 
In addition, Seller shall be entitled to retain all COPAS overhead
charges applicable to the Properties, even after the Effective Date, up to the
time Seller ceases to be the Operator of the Properties.


 


10.                                 The
obligations of Buyer under this Agreement shall be in addition to, and not in
lieu of, Buyer’s obligations under any confidentiality agreements previously
executed by Seller and Buyer that relate to the Properties (the “Prior
Confidentiality Agreement”). 
Notwithstanding anything to the contrary contained in the Prior
Confidentiality Agreement, Buyer acknowledges and agrees that the terms and
provisions of the Prior Confidentiality Agreement shall not be superseded by
the provisions of this Agreement, but shall continue in full force and effect
until the Closing Date, or if Closing does not occur, under the terms of such
Prior Confidentiality Agreement.  In
addition, reference is hereby made to that certain letter between the parties
dated May 3, 2004, a copy of which is attached hereto as Exhibit G, concerning
Buyer’s due diligence pertaining to the Properties (the “Due Diligence
Letter”).  Seller and Buyer agree that
the Due Diligence Letter shall continue in force and effect as written;
provided, however, wherever there is a conflict between a provision of this
Agreement and a provision of the Due Diligence Letter, if any, the provision of
this Agreement shall control.


 


11.                                 At
the Closing, (i) Seller shall execute, acknowledge and deliver to Buyer a
conveyance of the Properties in the form attached hereto as Exhibit H (the
“Conveyance”) and (ii) to the extent Buyer so requests, Seller shall execute
and deliver to Buyer (1) letters in lieu of transfer orders (or similar
documentation), in form acceptable to all parties, (2) an affidavit or other
certification, as permitted by the Internal Revenue Code of 1986 as amended
(the “Code”) that Seller is not a “foreign person” within the meaning of
Section 1445 of the Code (i.e., Seller is not a non-resident alien,
foreign corporation, foreign partnership, foreign trust or foreign estate as
those terms are defined in such Code and the regulations promulgated
thereunder), (3) Texas Railroad Commission Change of Operator P-4 forms, (4)
any other forms required by governmental authority concerning the transfer of
the Properties or change of operator of the Properties, (5) resignation of
operator notices to non-operator working interest owners, and (6) other
operating agreement related letters concerning the transfer of the Properties or
change of operator.


 


12.                                 Exhibit
E attached hereto and made a part hereof sets forth the agreement between
Seller and Buyer as to the allocation of the Purchase Price among the
Properties.  Seller and Buyer, to the
extent required by the IRS, agree to consistently report, in all filings,
Purchase Price allocations among the Properties in accordance with Exhibit
“E”.  Seller and Buyer, to the extent
required by the IRS, agree to reasonably cooperate with each other in the
preparation, execution and filing of (a) all information returns and
supplements required to be filed with the IRS by the parties under
Section 1060 of the


 


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Code and the Treasury
Regulations promulgated thereunder relating to the allocation of the Purchase
Price, and (b) all similar filings required to be filed with respect to the
transactions contemplated by this Agreement with the IRS and all other
appropriate taxing authorities.


 


13.                                 If
the Closing occurs, Seller and Buyer agree as follows:


 


(a)                                  Buyer
assumes and agrees to pay, perform and discharge the following liabilities and
obligations (collectively, the “Assumed Obligations”):


 


(i)                                     all
liabilities and obligations that are attributable to the ownership or operation
of the Properties after the Effective Date, which shall include damage to
property, or injury to or death of persons, in each case occurring after the
Effective Date, but attributable, in whole or in part to physical conditions
that existed or field operations that occurred before the Effective Date;


 


(ii)                                  all
liabilities and obligations to properly plug and abandon all wells and
disassemble and remove all related facilities and equipment now or hereafter
located on the Properties and clean up and restore the Properties (including
all obligations to clean, close and abandon all pits and impoundments) in
accordance with applicable laws (regardless of whether any such obligation to
plug, abandon, remove, clean up and restore is attributable to periods of time
prior to or after the Effective Date);


 


(iii)                               any
and all obligations with respect to imbalances of oil, gas or other
hydrocarbons under any gas balancing or similar arrangements affecting the
Properties with respect to amounts owed thereunder by Seller as of the
Effective Date;


 


(iv)                              any
obligations or liability for claims arising from the following occurrences,
events and activities on or related to the Properties, regardless of whether
resulting from acts or omissions prior to the Closing Date, or the condition of
the Properties at Closing: (i) any pollutants, contaminants, or hazardous or
toxic waste, substances or materials at, on, or beneath any Property requiring
action to remedy, stabilize, treat, clean up, or otherwise alter the
environmental condition of the air, land, soil, surface, subsurface strata,
surface water, ground water, or sediments with respect to any Property, (ii)
underground injection activities and waste disposal; or (iii) necessary
remediation, and the cost of such remediation, or any control, assessment, or
compliance with respect to any pollution or contamination.


 


(b)                                 BUYER AGREES TO RELEASE, INDEMNIFY,
DEFEND AND HOLD HARMLESS SELLER AND ITS AFFILIATES AND ITS AND THEIR RESPECTIVE
DIRECTORS, MEMBERS, MANAGERS, GENERAL PARTNERS, OFFICERS, EMPLOYEES, AGENTS,
REPRESENTATIVES, HEIRS, SUCCESSORS AND ASSIGNS (COLLECTIVELY, THE “SELLER
INDEMNIFIED PARTIES”) FROM AND AGAINST ANY AND ALL CLAIMS, LIABILITIES,
LOSSES, COSTS AND EXPENSES (INCLUDING, WITHOUT LIMITATION, COURT COSTS AND
REASONABLE ATTORNEYS’ FEES) (COLLECTIVELY, “LOSSES”) THAT ARE
ATTRIBUTABLE TO (i) THE ASSUMED OBLIGATIONS OR (ii) A BREACH BY BUYER OF ITS
WARRANTIES, COVENANTS, REPRESENTATIONS AND


 


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AGREEMENTS HEREUNDER, IN EACH CASE WITHOUT REGARD TO
THE SOLE, PARTIAL OR CONCURRENT NEGLIGENCE, GROSS NEGLIGENCE, STRICT LIABILITY,
OR OTHER FAULT OF THE SELLER INDEMNIFIED PARTIES;


 


(c)                                  Seller and Buyer agree the indemnity
provisions contained in this Agreement are conspicuous, that the same comply
with the express negligence test and that the parties intend to shift the risk
of liability as therein provided.


 


14.                                 After
Closing, Seller and Buyer agree to take such further actions and to execute,
acknowledge and deliver such additional documents and instruments as may be
necessary or useful in carrying out the purposes of this Agreement or of any
document delivered pursuant hereto.


 


15.                                 IF
THE CLOSING OCCURS AND WITHOUT LIMITING BUYER’S OBLIGATIONS HEREUNDER, BUYER
HEREBY ASSUMES AND SHALL BE RESPONSIBLE FOR AND AGREES TO INDEMNIFY, RELEASE,
DEFEND AND HOLD HARMLESS THE SELLER INDEMNIFIED PARTIES FROM AND AGAINST ANY
AND ALL LOSSES ATTRIBUTABLE TO DAMAGE TO PROPERTY, INJURY TO OR DEATH OF
PERSONS OR OTHER LIVING THINGS, NATURAL RESOURCE DAMAGES, CERCLA RESPONSE
COSTS, ENVIRONMENTAL REMEDIATION AND RESTORATION COSTS, OR FINES OR PENALTIES
(COLLECTIVELY, “CLAIMS”) ARISING OUT OF OR ATTRIBUTABLE TO, IN
WHOLE OR IN PART, EITHER DIRECTLY OR INDIRECTLY, THE CONDITION OR OPERATION OF
THE PROPERTIES AT ANY TIME BEFORE, AT OR AFTER THE EFFECTIVE DATE (INCLUDING,
WITHOUT LIMITATION, ANY CLAIMS RELATING TO ANY CONDITION EXISTING ON, IN OR
UNDER, OR RESULTING FROM OPERATION OF, THE PROPERTIES AS OF THE EFFECTIVE DATE)
THAT IS DETERMINED TO BE A RESULT OF OR CAUSED IN WHOLE OR IN PART BY SELLER’S
VIOLATION OF, FAILURE TO FULFILL DUTIES IMPOSED BY OR INCURRENCE OF LIABILITY
UNDER, ANY ENVIRONMENTAL LAWS (AS DEFINED BELOW) OR UNDER ANY PRINCIPLE OF
COMMON LAW RELATING TO DUTIES TO PROTECT OR NOT UNDULY DISTURB HUMAN HEALTH OR
ENVIRONMENTAL QUALITY.


 


As used herein, the term
“Environmental Laws” shall mean any and all laws, statutes, regulations,
rules, orders, ordinances, permits, waivers, or determinations of any federal,
state or local governmental authority pertaining to safety, health or
conservation or protection of the environment, wildlife, or natural reserves in
effect in any and all jurisdictions in which the Properties are located,
including, without limitation, the Clean Air Act, as amended, the Federal Water
Pollution Control Act, as amended, the Safe Drinking Water Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended  (“CERCLA”), the
Superfund Amendments and Reauthorization Act of 1986, as amended (“SARA”),
the Resource Conservation and Recovery Act, as amended (“RCRA”), the
Hazardous and Solid Waste Amendments Act of 1984, as amended, the Toxic
Substances Control Act, as amended, and the Occupational Safety and Health Act,
as amended (“OSHA”), and any applicable state, tribal, or local
counterparts.  The terms “hazardous
substance”, “release”, and “threatened release” shall have the meanings
specified in CERCLA; provided, however, that to the extent the laws of the
state in which the Properties are located are applicable and have established a
meaning for “hazardous substance”, “release”, “threatened release”, “solid


 


8

















 


waste”, “hazardous
waste”, and “disposal” that is broader than that specified in CERCLA or RCRA,
such broader meaning shall apply with respect to the matters covered by such
laws.


 


16.                                 Upon
Buyer’s acceptance of this offer in the manner provided for herein, subject to
the termination right of the parties set forth in Section 8 above, this
offer shall constitute a binding and enforceable agreement between the parties.


 


17.                                 Except
as expressly provided herein to the contrary, neither party shall assign this
Agreement or any of its rights or obligations hereunder without the prior
written consent of the other party and any assignment made without such consent
shall be void; provided, however, that Buyer hereby consents to (i) an
assignment by Seller of all or part of its rights under this Agreement in order
to accomplish a like kind exchange and (ii) an assignment by Seller of all or
any portion of its rights hereunder, but not its obligations, after the
Closing.  Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, successors and permitted assigns.


 


18.                                 In
the event there is a conflict between the terms of this Agreement and the
Conveyance, the terms and conditions of this Agreement shall prevail.


 


19.                                 Except
as otherwise provided herein, each party shall be solely responsible for all
expenses incurred by it in connection with this transaction (including, without
limitation, fees and expenses of its own counsel and consultants).  Buyer shall pay for all documentary, filing
and recording fees required in connection with the filing and recording of the
Conveyance delivered by Seller to Buyer at Closing.  Within 45 days following Closing, Buyer shall furnish Seller
with a statement setting forth the recording information for each county or
parish wherein such Conveyance was recorded.


 


20.                                 If
any term or other provision of this Agreement is invalid, illegal or incapable
of being enforced under any rule of law, all other conditions and provisions of
this Agreement shall nevertheless remain in full force and effect so long as
the economic or legal substance of the transactions contemplated hereby is not
affected in a materially adverse manner with respect to either party.


 


21.                                 Seller
and Buyer shall consult with each other with regard to all publicity and other
releases issued at or prior to the Closing concerning this Agreement and the
transactions contemplated hereby and, except as required by applicable law or
the applicable rules or regulations of any governmental body or stock exchange,
neither party shall issue any publicity or other release without the prior
written consent of the other party.


 


22.                                 NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, SELLER MAKES NO
REPRESENTATION OR WARRANTIES OF ANY KIND TO BUYER THAT BUYER WILL SUCCEED TO
SELLER’S OPERATORSHIP OF ANY WELL CONSTITUTING A PART OF THE PROPERTIES.  BUYER ACKNOWLEDGES AND AGREES THAT BUYER
WILL BE REQUIRED TO COMPLY WITH THE TERMS OF ANY APPLICABLE OPERATING
AGREEMENT, UNIT OPERATING AGREEMENT OR OTHER CONTRACT RELATING TO ANY ELECTIONS
OR OTHER SELECTION PROCEDURES IN ORDER TO SUCCEED SELLER AS OPERATOR
THEREUNDER.


 


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23.                           This
Agreement, including all Exhibits attached hereto and made a part hereof,
together with the Prior Confidentiality Agreement and Due Diligence Letter,
constitute the entire agreement between the parties with respect to the subject
matter hereof and thereof and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties with respect
to same.  No supplement, amendment,
alteration, modification, waiver or termination of this Agreement shall be
binding unless executed in writing by the parties hereto.


 


24.                           This
Agreement is governed under the laws of the State of Texas excluding any conflicts
of law rules or principal that might apply the law of another
jurisdiction.  All disputes shall be
submitted to the jurisdiction of the courts in the State of Texas and venue
shall be in Harris County, Texas.


 


25.                           The
representations, warranties, covenants and obligations of the parties under
this Agreement shall survive the Closing.


 


26.                                 Seller represents to Buyer that:


 


(a)                                  Organization and
Qualification.  Texas Independent Exploration Limited is a
limited partnership duly organized and legally existing and in good standing under the laws of the State of Texas.  Gulfcoast Acquisitions Limited is a limited
partnership duly organized and legally existing and in good standing under the laws of the State of Texas.


 


(b)                                 Due Authorization. 
Each of the Sellers has full power to enter into and perform its
obligations under this Agreement and has taken all proper action to authorize
entering into this Agreement and performance of its obligations hereunder.


 


(c)                                  Approvals.  To
Seller’s “Knowledge” (which, as
used in this Agreement, shall mean the actual knowledge of Frederick W.
Zimmerman for all matters, Kent Davidson for land matters, and Todd Grabois for
accounting and financial matters), neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, nor
the compliance with the terms hereof, will result in any default under any
agreement or instrument to which Seller is a party or by which any of the
Properties are bound, or violate any order, writ, injunction, decree, statute,
rule or regulation applicable to Seller or to any of the Properties.


 


(d)                                 Valid, Binding and
Enforceable.  This Agreement constitutes (and the
Conveyance provided for herein to be delivered at Closing will, when executed
and delivered, constitute) the legal, valid and binding obligation of Seller,
enforceable in accordance with its terms, except as limited by bankruptcy or
other laws applicable generally to creditor’s rights and as limited by general
equitable principles.


 


(e)                                  No Litigation.  To
Seller’s Knowledge, there are no pending or threatened suits, actions,
administrative or arbitration proceedings in which Seller is a party for which demands have been made upon Seller
and which materially affect the Properties or materially affect Seller’s
title to any of the Properties, or the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.


 


(f)                                    Warranty of Title. 
Except for a mortgage to Compass Bank, Seller has not previously sold, conveyed, mortgaged or transferred, or is
subject to an enforceable


 


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agreement to sell, convey, mortgage or transfer, the
Properties (or any interest therein). 
Except for the Permitted Encumbrances (below defined), the Properties
are free and clear of any and all liens, security interests, encumbrances, and
other burdens caused or created by, through or under Seller, but not otherwise.  As
used in this Agreement the term “Permitted Encumbrances” shall mean:  (i) any materialman’s, mechanic’s,
repairman’s, employee’s, contractor’s, operator’s or other similar liens or
charges for unpaid liquidated amounts arising in the ordinary course of
business which are not yet due; (ii) liens for taxes and similar assessments
which are not yet due; (iii) all lessors’ royalties, overriding royalties,
and other similar burdens which are of record or which are reflected on
Seller’s division of interest pay decks provided by Seller to Buyer’s
consultants pertaining to the Properties; (iv) unitization and pooling
designations, declarations, and orders, (v) agreements which are of record or
copies of which were provided by Seller to Buyer or its consultants, or which
were secured by Buyer from Seller, pertaining to Buyer’s due diligence relative
to the Properties or which are set forth on Exhibit “A” and (vi) the existing
mortgage to Compass Bank.


 


(g)                                 AFE Items.  (i)
Seller has not incurred any single expense, or made any commitments to make a
single expenditure, in connection with (and no other obligations or liabilities
have been incurred which would adversely affect) the ownership or operation of
the Properties after the Effective Date, which exceeds $50,000, net to Seller’s
interest, as to any individual well or surface facility.


 


(h)                                 Tax Partnerships.  To Seller’s Knowledge, none of the
Properties is subject to a tax partnership.


 


(i)                                     No Material
Misstatement.  No representation or warranty made by Seller
in this Agreement contains or will contain, at the time of execution of this
Agreement and at the Closing, any untrue statement of a material fact.


 


27.                                 Buyer represents to Seller that:


 


(a)                                  Organization and Qualification.  Whittier Energy Company is a corporation
duly organized and legally existing and in good standing under the laws of the
State of Nevada.


 


(b)                                 Due Authorization.  Buyer has full power to enter into and perform its obligations
under this Agreement and has taken all proper action to authorize entering into
this Agreement and performance of its obligations hereunder.


 


(c)                                  Approvals. 
To Buyer’s Knowledge (which, as used in this Agreement, shall mean the
actual knowledge, after reasonable inquiry, of any officer or manager of Buyer
or Whittier Energy Corporation in charge of a discrete business area or
function having responsibility for the referenced matter), neither the
execution and delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor the compliance with the terms hereof,
will result in any default under any agreement or instrument to which Buyer is
a party, or violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Buyer.


 


(d)                                 Valid, Binding and Enforceable.  This Agreement constitutes (and the
Conveyance provided for herein to be delivered at Closing will, when executed
and delivered, constitute) the legal, valid and binding obligation of Buyer,
enforceable in


 


11

















 


accordance with its terms,
except as limited by bankruptcy or other laws applicable generally to
creditor’s rights and as limited by general equitable principles.


 


(e)                                  No Litigation.  To Buyer’s Knowledge, there are no pending suits, actions,
administrative or arbitration proceedings in which Buyer is a party, and which
materially affect Buyer’s execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, and to Buyer’s Knowledge,
no demands which might lead to the same have been made on Buyer.


 


(f)                                    Exhibit “D”, Net production forecast schedule for
Scott & Hopper #3 Existing Completion, is the production forecast
schedule for said well that Buyer has provided Compass Bank.


 


(g)                                 Preferred Stock.  As of Closing, neither Buyer nor Whittier Energy Corporation has
any issued or outstanding shares of preferred stock.


 


(h)                                 Employee Stock Options.  As of Closing, the Buyer has no outstanding
options to acquire its common stock.  At
Closing, Whittier Energy Corporation will have no more than 1,600,000 shares of
its common stock available for issuance under outstanding stock option plans
(“Stock Incentive Plans”), including Whittier Energy Corporation’s Long Term
Incentive Plan, and will have no more than 916,500 options to acquire shares of
Whittier Energy Corporation’s common stock issued and outstanding under its
existing Stock Incentive Plans.


 


28.                                 If Closing occurs, Seller will deliver to Buyer, within ten (10)
days after Closing, all of Seller’s files, records and data pertaining to the
ownership and/or operation of the Properties (including, without limitation,
title records, lease files, division order files, non-geophysical surveys and
non-interpretive maps, contracts and contract files, production marketing
records, correspondence files, well files and production records, production
and severance tax records, ad valorem tax records, production accounting
records, environmental records and regulatory and regulatory compliance
records), other than those which Seller cannot provide to Buyer without
breaching confidentiality agreements with third parties (provided that Seller
will cooperate with Buyer to obtain a release of such restriction or otherwise
obtain access).  Any Seller may, at its
election, and at its expense, make and retain copies of any or all such files.


 


29.                                 If Closing occurs, Seller shall, on the date
of Closing, agree (and, upon the delivery to Buyer of the Conveyance, shall be
deemed to have agreed), to continue to be responsible for payment of all costs
and expenses relating to the operation of the Properties before the Closing
Date.


 


30.                                 Prior
to the Closing Seller agrees to inform Buyer concerning active proposals (whether made by Seller or by any
other party) to deepen, plug back, rework or abandon any wells included in the
Properties, to conduct other operations with respect to the Properties for
which consent is required under the applicable operating agreement, or to
conduct any other operations with respect to the Properties other than routine
operation of the producing wells located on the Properties.


 


31.                                 Seller agrees to indemnify and hold harmless
Buyer (and its partners and its and
their respective affiliates, and the respective officers, directors,
employees, attorneys and agents of such parties) from and against any and all
claims, actions, causes of action,


 


12

















 


liabilities,
damages, losses, costs or expenses (including, without limitation, court costs
and reasonable attorneys fees) of any kind or character arising out of or
resulting from any agreement, arrangement or understanding alleged to have been
made by, or on behalf of, Seller with any broker or finder in connection with
this Agreement or the transaction contemplated hereby.  Buyer agrees to indemnify and hold harmless
Seller (and its partners and its and
their respective affiliates and the respective officers, directors,
employees, attorneys and agents of such parties) from and against any and all
claims, actions, causes of action, liabilities, damages, losses, costs or
expenses (including, without limitation, court costs and reasonable attorneys
fees) of any kind or character arising out of or resulting from any agreement,
arrangement or understanding alleged to have been made by, or on behalf of,
Buyer with any broker or finder in connection with this Agreement or the
transaction contemplated hereby.


 


32.                                 With
respect to any
third party that Seller has not previously sent information to or negotiated
with concerning the sale or disposal of the Properties, while this
Agreement is in force and effect, Sellers and any of their officers, directors,
employees, or agents shall not, directly or indirectly, solicit any offer from,
initiate or engage in any discussions or negotiations with, or provide any
information to, such third parties concerning any possible proposal regarding a
merger, sale of assets or stock, or other transaction involving the
acquisition, disposition or conveyance of the Properties.


 


33.                                 The
amount of the Cash Purchase Price of $5,270,000.00 and the amount due on the
Convertible Note in the amount of $2,187,330.00 shall each be adjusted at
Closing as herein after provided by the amount of the Upward Adjustments and
Downward Adjustments defined below as follows:


 


(a)                                  Upward Adjustments.  The amount of the Cash Purchase Price and
the Convertible Note in the proportions provided for in (c) below shall be
adjusted upward by the following amounts (determined without duplication and on
a cash basis in accordance with generally accepted accounting principles
consistently applied):


 


(i)                                     the
amount of all expenses (net to Sellers’ interest) incurred and paid on behalf
of Sellers that are attributable to the ownership or operation of the
Properties and to the period of time from and after the Effective Date through
May 31, 2004, including without
limitation, capital expenditures, ad valorem, property and similar taxes and
assessments, severance, sales and production taxes (but excluding income taxes
and franchise taxes), rentals and similar charges, amounts billed under
applicable operating agreements and prepaid expenses;


 


(ii)                                  the
value of all merchantable, allowable oil in storage (net to Seller’s interest)
above the pipeline connection at the Effective Date net of severance taxes and
royalty, the value to be the posted price on the Effective Date less taxes and
deductions/adjustments by the purchaser for gravity, transportation, and other
customary deductions/adjustments; and


 


(iii)                               any
other amount agreed upon by Seller and Buyer.


 


(b)                                 Downward Adjustments.  The amount of the Cash Purchase Price and
the Convertible Note in the proportions provided for in (c) below shall be
adjusted downward by the following amounts (determined without duplication and
on a cash basis in accordance with generally accepted accounting principles
consistently applied):


 


13

















 


(i)                                     the
amount of all proceeds (net to Sellers’ interest) earned and received by or on
behalf of Sellers that are attributable to the ownership or operation of the
Properties for the period of time from and after the Effective Date through May
31, 2004, which Seller shall be entitled to keep;


 


(ii)                                  any
property taxes allocated to Seller pursuant to Section 34; and


 


(iii)                               any
other amount agreed upon by Seller and Buyer.


 


All such adjustments made
as of Closing shall be set forth on a preliminary settlement statement
(“Preliminary Settlement Statement”) to be prepared by Seller and Buyer within
two days of Closing.  All such
adjustments on the Preliminary Settlement Statement shall be made based on
actual numbers, or if such numbers are not available, on estimated numbers,
with such estimates to be corrected to actual numbers in the Final Recap
Statement (as defined in Section 35 below).


 


(c)                                  Adjustment Amount.  As used herein the, the term
“Preliminary Settlement Amount” shall mean the amount that results from
subtracting the total of Downward Adjustments as reflected in the Preliminary
Settlement Statement from the total of Upward Adjustments as reflected in the
Preliminary Settlement Statement.  The
Preliminary Settlement Amount shall be allocated 1/3 to the Cash Purchase Price
and 2/3 to the Convertible Note with the amount of each at Closing either being
increased or reduced appropriately.


 


34.                                 Real
estate and personal property taxes, if any, for the calendar year January 1,
2004, through December 31, 2004, shall be prorated to the Effective Date
based upon the most recent property tax assessments and most recent certified
tax rates.  Such tax proration shall be
settled at Closing by an adjustment to the Cash Purchase Price.  Buyer will assume responsibility for the
actual payment to applicable government authorities of any unpaid property
taxes not yet due.


 


35.                                 Within
90 days after the Closing, Seller shall provide to Buyer, for Buyer’s review, a
proposed final recapitulation settlement in the form of the Preliminary
Settlement Statement (the “Final Recap Statement”) to account for all
adjustments known as of such date pursuant to Section 33 (the “Final
Recap”).  Buyer shall have the right,
within 30 days after receipt of the Final Recap Statement, to audit the Final
Recap Statement.  If Buyer disagrees
with the Final Recap Statement, Buyer and Seller shall use best efforts to
reach agreement within 30 days following Buyer’s audit of the Final Recap
Statement.


 


Should the parties be
unable to resolve any disagreements relating to the Final Recap, such
disagreement shall, at the earliest practicable date, be referred, by either or
both of the parties, to an accounting firm mutually acceptable to Buyer and
Seller (the “Accounting Firm”), along with all audit reports, work papers,
schedules, and calculations related to the matter in dispute.  Within 25 days after such submission, the
Accounting Firm shall issue a letter report determining the Final Recap, which
shall be final and binding.  Each party
shall bear its own fees and expenses incurred in resolving any dispute under
this Section 35, except for the Accounting Firm, which shall be borne
equally by the parties.


 


14

















 


Payment of monies owed
under the Final Recap shall be made by check from one party to the other and
shall be paid within 10 days from the date Seller and Buyer agree on the Final
Recap Statement, or 10 days from the determination of the Final Recap by the
Accounting Firm, whichever is later.


 


36.                                 Notwithstanding anything else herein
contained to the contrary, and except for (i) the indemnity of Sellers provided
for in Section 37 and in the Upside Sharing Payment Agreement and (ii) the
representations, warranties, covenants and obligations of Seller under this
Agreement that are timely made the subject matter of a Buyer’s Claim or Claims
(as defined below), the representations, warranties, covenants and obligations
of Seller under this Agreement shall survive the Closing only for a period of
one (1) year from and after the Closing Date; provided, however, that any claim
with respect to the breach of such representations, warranties, covenants and
obligations of Seller may be made only if Buyer shall have notified Seller in
writing of such claim, containing reasonable details concerning the nature of
such claim, on or before one (1) year from and after the Closing Date (“Buyer’s
Claim or Claims”).  With respect to any
representations, warranties, covenants and obligations of Seller under this
Agreement that are the subject matter of a Buyer’s Claim or Claims, such
representations, warranties, covenants and obligations of Seller under this
Agreement shall continue to be in force and effect only for the purpose of
permitting Buyer to pursue Buyer’s Claim(s) described in the notice and then
only until such time as the particular Buyer’s Claim or Claims pertaining
thereto is resolved, either by agreement of the parties or judicial
decree.  Seller shall not have any
obligation or liability under this Agreement or in connection with or with
respect to the transactions contemplated in this Agreement for any breach,
misrepresentation or noncompliance with respect to any representation,
warranty, covenant, indemnity or obligation (a) if such breach,
misrepresentation or noncompliance shall have been waived by the Buyer in
writing or (b) if the Buyer had knowledge of, or pursuant to its due diligence
review should have had knowledge of, the relevant facts based on Buyer’s due
diligence review of documents made available by Seller to Buyer at or before
Closing.


 


37.                                 Each
of the Sellers (i) hereby instructs and
authorizes Buyer to make all payments due Sellers under this Agreement and the
Exhibits attached hereto, including, without limitation, payment of the
Purchase Price, to Texas Independent Exploration Limited (“TIE”) and (ii)
agrees to hold Buyer harmless and indemnify Buyer, to the extent and amount of
such payments, from and against any claim made by a Seller concerning such payments
made by Buyer to TIE.


 


TEXAS INDEPENDENT EXPLORATION LIMITED


 


By: Independent
Operating, L.L.C., a Texas limited


liability company, its
general partner


 


 


	
  By:

  	
  /s/ Frederick W.
  Zimmerman

  	
   

  
	
   

  	
  Frederick W. Zimmerman,
  Manager

  



 


15

















 


	
  GULFCOAST
  ACQUISITIONS LIMITED

  
	
  By: Blanco Minerals,
  L.L.C., a Texas limited

  liability company, its general partner

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Frederick W.
  Zimmerman

  	
   

  
	
   

  	
  Frederick W. Zimmerman,
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Frederick W.
  Zimmerman

  	
   

  
	
   

  	
  Frederick W. Zimmerman

  
	
   

  	
   

  
	
   

  	
   

  
	
  FREDERICK W. ZIMMERMAN

  
	
  d/b/a ISLAND RESOURCES

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ Frederick W.
  Zimmerman

  	
   

  
	
   

  	
  Frederick W. Zimmerman

  



 


 


AGREED TO AND ACCEPTED
THIS 15th DAY OF JUNE, 2004.


 


WHITTIER ENERGY COMPANY


 


	
  By:

  	
  /s/ Daniel H. Silverman

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  Daniel H. Silverman

  
	
   

  	
   

  
	
  Title:

  	
  Chief Operating Officer

  



 


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